MAY 6, 12000) -- Ah,victory! Sweet, delicious vindication!

The summer of 12000 HE (2000 AD to you regular calendar folks) is a time of distinct pleasure for Euro-skeptics like me. The Euro, that shit-basket compilation currency supposed to save the European economy, has tanked. It reached it's peak in exchange value with the US dollar on its first day of existence and has only gone downhill since. I can't say "I told you so!" only because I didn't actually tell anyone so. But it wasn't hard to predict.

I am sure the Euro-skeptics at the CIB will use this as a good illustration of why Britain was wise to opt out of the European Monetary Union, and why they should continue to do so. To help their argument, I have prepared the tables below.

The Euro is a new, still-fictitious fiat currency used by the member countries of the European Monetary Union (EMU). It is *NOT* an average of the old currencies, but rather a composite of them, with each old, national currency making up a different fraction of the new one. How they got these figures, only the accountants in charge could tell you; it is sufficient to know that the rates of exchange are fixed, so the nominal value of EMU currencies vs. non-EMU currencies goes up and down with the Euro.

That's the problem. The Euro is *NOT* fixed in relation to the US dollar, much as the trans-national fascists at the European Central Bank (ECB) would like it to be (that's probably their next step). Since it is traded freely, it's value re the US dollar goes up or down with demand. Evidently demand has been weak, to say the least.

No matter how much you hear that EMU was begun for economic reasons, don't believe it. EMU was begun for political reasons, to bind as many formerly-independent countries as possible together in a monetary co-dependency from which they can never dis-entangle themselves. It was a bid for trans-national power, and it has worked almost perfectly.

The only little im-perfection is that nobody seems to want their crappy new currency, the Euro.

According to the Euronazis, the Euro should be highly desirable on the World's currency markets, since people all over the World trade with Euroland, and they've got to have he local currency to do that, right? It shouldn't matter that no actual, physical Euros are available; big corporations do everything with bank transfers anyway, so nobdy need ever see the actual, physical stuff. Local payments in EMU countries are calculated in Euros but paid in the old national currencies at a fixed conversion rate, thus eliminating internal Euroland fluctuations.

So, how come the Euro has done nothing but sink since it was introduced?

There are lots of reasons, almost as many as there are excuses. One is that, despite Monetary Union, the nations of the EMU are still bad places to do business when compared with Asia and the Americas. All are high-tax states, all have high added costs to hiring workers, some make it expensive even to fire workers, and all have generous welfare programs which discourage people from working in the first place. Also, workers are less mobile: they are less likely to leave home in search of work than are, say, Americans or citizens of Latin American countries.

The existence of skilled, educated workers used to be an advantage for Europe, but isn't anymore. Asians are now just as skilled and educated, and cheaper to hire. Ditto Latin Americans. Worse, Europe's productivity is poor compared to elsewhere. This is because European labor unions have resisted automation, and with the typical European legal and labor situation, companies are reluctant to invest in new plants.

The biggest factor, though, is that investors want to keep their assets in US dollars, not Euros. This is true even of European investors, who are keenly aware of the slide of "their" currency. Thus, even when they make profits in Euros, they convert that money to US dollars for safe-keeping. This results in a premium on dollars and a flood of unwanted Euros.

It is instructive to look at the values of the EMU national currencies from January 4, 11999 - the first day of Euro trading - to today, May 6, 12000.

I have taken the initial figures from my local newspaper of January 4, 11999. To improve accuracy, I took the US dollar figures and converted them on my calculator. The May 6, 12000 figures are from the Universal Currency Converter and were made at 13:00 Eastern Time.

SYM.  COUNTRY currency    4.JAN.99     6.MAY.00   
--------------------------------------------------
ATS   AUSTRIA schilling    .0856971     .065122100
BEF   BELGIUM franc        .029197      .022213700
EUR   EUROLAND euro       1.1886        .896100000
FIM   FINLAND markka       .198602      .150713000
FRF   FRANCE franc         .179998      .136610000
DEM   GERMANY mark         .603609      .458169000
NLG   HOLLAND guilder      .535189      .406632000
IEP   IRELAND punt        1.49902      1.137810000
ITL   ITALY lira           .000610002   .000462797
LUF   LUXEMBOURG franc     .0294648     .022213700
PTE   PORTUGAL escudo      .00588935    .004469730
ESP   SPAIN peseta         .00709522    .005385670
--------------------------------------------------

AVERAGE LOSS OF VALUE = 24%, nearly one quarter of their previous worth.

WOW.

Now compare this to ...

SYM.  COUNTRY currency    4.JAN.99   6.MAY.00     % CHANGE +/-
--------------------------------------------------------------
GBP   BRITAIN pound       1.657      1.5309       -7.6101388  
DKK   DENMARK kroner       .158346    .120438    -23.93997954 
GRD   GREECE drachma       .00360399  .00267094  -25.88936151 
SEK   SWEDEN krona         .124626    .11012     -11.63962576 
--------------------------------------------------------------

Now that's pretty interesting.

All EU currencies have lost value relative to the US dollar - not surprising, since the dollar is very strong right now.

Note the differences. The Danish kroner and Greek drachma are about at par with the Euro over time, the kroner suffering a little less erosion, the drachma a little more. If the Brits ever had any doubt they'd done the right thing, this should dispell them: the pound is down only 7% against the dollar over the last 16 months, less than a third as bad as the Euro. The Swedish krona would have lost more than twice as much value as it actually did if it were tied to the Euro.

What would have happened if these countries had joined the EMU? Let's figure it out. The Euro started at $1.1886 and ended yesterday (Friday, May 5, 12000) at $0.8961, a loss of 29.25 cents or 24.60878344 percent. Thus ...

                          Current Value    Value if  
SYM.  COUNTRY currency    in US dollars    EMU Member
-----------------------------------------------------
GBP   BRITAIN pound       1.5309           1.24923   
DKK   DENMARK kroner       .120438          .119416  
GRD   GREECE drachma       .00267094        .00271709
SEK   SWEDEN krona         .110120          .09395715
-----------------------------------------------------

We see that Greece, with it's very poor economy, would have had less devaluation if it had been allowed to join the EMU. The presence of the drachma, of course, would have further eroded the value of the Euro, despite the Eurocrats' fantasies to the contrary.

Guess what? They are right now considering Greece as the next EMU member.